Another big stick policy comes bit unstuck
19 December 2018
Sydney Morning Herald
Another of the federal government 'big stick' policies designed to force down power bills has run into trouble after the energy market rulemarker rejected its proposal for a cap on default electricity prices.
This rejection came as Labor and Liberal state energy ministers plan to push for the development of policies to achieve a net zero emissions energy system by 2050 at a meeting of the Council of Australian Governments (COAG) Energy Council on Wednesday.
The government's planned regulated power price has been knocked back by the sector's rule maker.
Documents obtained by The Age and Sydney Morning Herald show the Australian Energy Market Commission – which creates the rules for the power sector – has rejected the federal government’s proposed capped default power price for consumers that have not elected to take up market offers.
Instead, the documents show, AEMC chairman John Pierce has argued the default offer should be developed as a comparison rate rather than a capped price.
"It would be reasonable to expect that retailers would attempt to recover lost revenue [from a price cap] by increasing prices for their other customers, or at least in the short term, withdrawing their lower-priced market offers," he said in a letter to the COAG Energy Council.
“A comparison rate is likely to address the problems of unreasonably high standing offers and a lack of comparability between market offers, without the risks associated with a default offer designed as a regulated price cap."
Standing offers are the back-up contract consumers are put on when their discounts end and are usually significantly higher than the discount offers.
Mr Pierce said a comparison rate was a simpler metric for consumers trying to differentiate offers, would reduce confusion and remove the incentive for electricity retailers to inflate standing offers above the comparison rate just to advertise large discounts.
Federal Energy Minister Angus Taylor said the government would continue to work on the default price including discussions at Wednesday's ministerial meeting in Adelaide.
He noted that the establishment of a default offer was a recommendation from the Australian Competition and Consumer Commission.
On Tuesday, newly appointed AGL chief executive Brett Redman called for the federal government to pick an energy policy and "stick to it" to drive investment and bring down power prices.
The energy industry has already begun work on a standard comparison rate and the government’s own energy saver websites provide a similar service.
This default offer has been part of the federal government’s ‘big stick’ threats to the energy industry to drive down historically high power prices.
Those threats include proposed powers that could break up energy companies that acted against the national interest.
Legislation implementing that power was pushed by the Senate to an inquiry which will report back in March next year.
Like the default offer, the forced divestment proposal was rejected by industry, which called it a "dangerous precedent".
At the COAG meeting on Wednesday, state energy ministers also plan to ask the Energy Security Board – which is the overarching energy industry body – to develop national policy options for how the country can achieve net zero carbon emissions by 2050.
"We can't have an energy policy that ignores emissions," one state energy minister said.
It is expected that state energy ministers at COAG will support the reliability obligation, a remnant of the federal government's National Energy Guarantee.
This was the previous energy policy that attempted to combine energy security, reliability and emissions which was dumped when Malcolm Turnbull was ousted as Prime Minister earlier this year.
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Another BIG STICK Policy Comes Unstuck (Read 638 times)
